Detailed Answer
When you pass assets to a child under age 18 without designating a transfer vehicle, North Carolina law requires the court to appoint a guardian of the child’s estate. Under G.S. 35A-1201, the judge selects a guardian to manage the funds. That guardian must file an annual accounting, post a bond and obtain court approval for transactions. This process adds cost, delay and reduces your control.
Proactive estate planning uses tools that hold or transfer assets outside of guardianship. You decide who will manage the property, set clear instructions and avoid court supervision. The most common strategies include revocable living trusts, testamentary trusts, custodial accounts under the Uniform Transfers to Minors Act (UTMA) and payable-on-death designations.
1. Revocable Living Trusts
A revocable living trust lets you transfer assets now or at your death into a trust you control. You name a successor trustee—often a trusted adult or financial institution—to manage the trust for the child until you set conditions for distribution, such as reaching a specified age. Assets in the trust never go through probate or guardianship.
2. Testamentary Trusts in Your Will
By including a testamentary trust in your will, you ensure that any inherited assets go into a trust at your death. You designate a trustee and set rules for distributions. The court still oversees your will, but the minor never holds legal title and avoids a separate guardianship estate.
3. Custodial Accounts under UTMA
The North Carolina Uniform Transfers to Minors Act, codified at G.S. 36A-40 to 36A-46, lets you name a custodian to hold and manage cash, securities or other personal property for a minor. When the child reaches age 21 (or an earlier age you choose between 18 and 21), the custodian must transfer the assets outright to the child without court intervention.
4. Payable-on-Death and Transfer-on-Death Designations
Many financial accounts allow you to name a payee who receives funds directly upon your death. These assets pass outside of probate and guardianship. You can also register real estate with a transfer-on-death deed so your chosen beneficiary takes title automatically.
Key Takeaways
- Guardianship arises when a minor inherits assets without a designated transfer mechanism (G.S. 35A-1201).
- Revocable living trusts and testamentary trusts let you name a trustee, set distribution terms and keep assets out of court.
- Custodial accounts under UTMA (G.S. 36A-40) shift management to a custodian until the child reaches the statutory age.
- Payable-on-death and transfer-on-death designations bypass probate and guardianship altogether.
- Proactive planning saves time, reduces cost, preserves privacy and keeps you in control of how a minor receives your estate.
Estate planning for minor beneficiaries avoids court-appointed guardianships and ensures assets pass smoothly under your instructions. Pierce Law Group’s attorneys guide you through trust drafting, custodial arrangements and beneficiary designations tailored to your family’s needs. Contact us today to protect your children’s inheritance and your peace of mind. Email us at intake@piercelaw.com or call (919) 341-7055.
